What is I-O?

Industrial-organizational (I-O) psychology is the scientific
study of the workplace. Rigor and methods of psychology are
applied to issues of critical relevance to business,
including talent management, coaching, assessment,
selection, training, organizational development,
performance, and work-life balance.

Parties and Bonuses Improve Morale, But Employers Should Also Consider Other Factors When Giving

Whether it’s a festive holiday party, an end-of-the-year bonus, or a thoughtful gift, many employees can expect something from their employers during this holiday season. Although giving gifts and parties can certainly be appreciated by employees, do they offer employers any long-term benefits?

A recent CareerBuilder survey of more than 4,000 workers and more than 2,600 employers shows organizations are going to be more likely to provide holiday parties and perks this year. According to the survey, 40% of employers plan to give their employees holiday bonuses this year, up from 33% in 2010. Fifty-eight percent of employers are planning a holiday party for their employees, up from 52%, and 30% of employers plan to give holiday gifts to employees, up from 29%. According to a recent Amrop Battalia Winston Survey, 74% of the companies polled will have parties this year.

During the holiday season, it seems any special recognition by an employer would be appreciated—but do parties and bonuses affect employee morale and motivation in the long-run?

According to Robert T. Brill, an associate professor in the Department of Psychology at Moravian College, any recognition would be “appreciated by most people, and at the time of the holidays, particularly so.”

“In general, recognition of employees at the holiday season is an appropriate and often expected gesture by employees,” added Kimberly Merriman, assistant professor of management and organization and a research fellow, Consortium for Sustainable Business Development, at Pennsylvania State University’s School of Graduate Professional Studies. “Employee recognition at this time of year has symbolic value beyond the objective value that may be attached. It sends a message that the employment relationship is more than simply a transactional one. That message is especially important to convey if employees have endured a year of no raises, extra workloads, threats of layoff or many of the other conditions common in workplaces right now.”

The key to gift giving and other forms of recognition around the holidays is being genuine, explained Robert Eisenberger, professor in the psychology department at the University of Houston. He studies perceived organizational support—what makes employees feel supported and cared about—and has recently published a book titled Perceived Organizational Support: Fostering Enthusiastic and Productive Employees.

“What’s important is the genuineness of what you do,” he explained. “If the employer just goes through the motions of giving a gift that doesn’t really indicate that they value employees, then it doesn’t count for much. What, really in terms of support, counts is a real indication of valuation and caring. If you put yourself in the mindset of employees, ask yourself ‘what indicates that you really care about them?’”

Research on employee recognition demonstrates that sincere, credible recognition is appreciated by employees and can enhance their motivation and performance, added Tom Becker, chairperson and professor in the Department of Business Administration at the University of Delaware.

“This is likely to be true whether the recognition is provided during the holidays or at other times,” Becker said.

What type of a gift or recognition will seem genuine to employees?

“They are the same sort of things you would see in everyday life,” Eisenberger explained. “One thing that indicates you care is the amount of time you are willing to spend on indicating that you care about employees. For example, taking employees or subordinates out for a meal indicates that you really care about them, because it’s easy to give them a few dollars, but taking the time to take your employees out to a meal takes effort.”

One example came from Eisenberger’s wife, who for many years has baked candies and cookies and put them in a nice gift box for employees and staff.

“It indicates that we are thankful for what they have done and that we are spending time on them,” he added.

What you give employees may also depend on who works for an organization.

“Regarding what types of recognition will be most welcomed, this depends on the individual employee,” Becker added. “A key principle of management is to know your employees’ needs and values. This allows managers and others to pick a form of recognition or reward that the employee will welcome. For some it might be money and for others a simple and sincere verbal acknowledgement of a job well done. Personality probably plays a role, too. For example, an extravert may prefer to be recognized publically and an introvert may prefer more private recognition.”

Becker said non-monetary recognition can be just as effective as a bonus.

“Forms of recognition besides money include written or verbal praise; symbolic rewards, such as plaques and certificates; small, meaningful gifts; or anything else that employees perceive as sincere recognition of their contributions and accomplishments,” he explained.

However, employers may get backlash if they have given in the past and then discontinue it, Merriman warned.

“The motivational effects may be most obvious in the absence rather than presence of such recognition, since employees anticipate receiving something,” she explained. “For instance, one organization I know of experienced employee backlash when it stopped giving out holiday turkeys. The company wisely reinstated the tradition the following year.”

In order to manage employee entitlement perceptions, like the turkey example, organizations should separate financial rewards from the tradition of holiday recognition and instead provide a form of recognition that can be maintained each year, Merriman added.

“The trick is finding something that can be maintained—even in the lean years—but still has value to employees. Here are two creative things a company might consider: providing free on-site car washes to employees for the day or providing free on-site gift wrapping. Of course, most employees would most value some extra paid time off during the holiday season if possible!”

Although general recognition such as parties and gifts can be expected to improve employee morale and help employees feel support from their organization, Brill explained that most of it comes in the form of positive assessment and general thanks, which won’t necessarily improve employee motivation.

“Individual recognition is generally hard to do in a thorough—accurate and reliable—manner by an organization during this hectic time of the year,” he explained. “Therefore, the holiday recognition is generally more exclusively positive and regarding appreciation for employees’ work, as opposed to its effectiveness.”

Because this show of holiday appreciation is general and not tied to any one employee’s work, Brill said employers should not expect it to impact employees’ work habits.

“This positive, general recognition is fine, but an organization should not expect it to motivate performance,” he explained. “It will go a long way toward morale and the worker's sense of commitment and gratitude to the employer, but changing performance usually will require a more ongoing, systematic approach to performance feedback and management. A one-time reward for basically being a part of the organization does a great deal for attitude and emotional connection, but little for long-term performance change.”

Although many organizations may not have time for it during the hectic holidays, Brill said individual recognition—such as performance bonuses instead of blanket holiday bonuses—by employers would be most effective at improving motivation.

“These holidays coincide with a temporal ending point—one more year gone. Thus, recognition about one's work role can be a helpful, and even powerful, part of that self-reflection and may greatly impact how one would see their work role,” he explained. “This type of recognition should be tailored to the individual, if possible, rather than the group in general.”

Although the holidays can symbolically be a good “ending point” for employees, Becker also added that recognition of employees’ contributions should not only be given during the holiday season.

“Reinforcement theory and related evidence suggests that the best time to recognize, and in other ways reward employees, is soon after the relevant behavior or behaviors occur,” he said.

Eisenberger stressed that it is important for employees to feel supported all year, not just around the holidays.

“If people aren’t supported the rest of the year and cared about, and then a show of that is made just around holiday time, it isn’t taken very seriously,” he explained. “If you just do it on one occasion during the year, it’s not going to have much effect. It needs to be part of a pattern of indicating that you value employees and that you care about them. It’s just like with relatives, you can’t be nice to relatives on the holiday and not be nice to them the rest of the time.”